Investing.com - The Canadian dollar rose to the day’s highs against its U.S. counterpart on Wednesday after the Bank of Canada left interest rates on hold, but cut its growth forecast for this year.
USD/CAD hit lows of 1.4493, down from 1.4527 ahead of the announcement after rising to a fresh 13-year peak of 1.4690 earlier.
Canada’s central bank kept its overnight cash rate unchanged at 0.50%, broadly in line with market expectations.
Some analysts had expected the BoC to cut rates by 25 basis points to 0.25% in response to fresh falls in oil prices.
The central bank cut rates twice in 2015 to offset the impact of cheaper oil prices on the economy.
Inflation in Canada is evolving broadly as expected, the bank said in a statement, remaining near the bottom of the target range.
The disinflationary effects of economic slack and low energy prices are being only partially offset by the impact of the lower Canadian dollar on import prices.
Prices for oil and other commodities have declined further and this represents a setback for the Canadian economy, the statement said.
The bank believes economic growth is likely to have stalled in the fourth quarter of 2015, weighed down by temporary weakness in the U.S. economy and weaker domestic business investment.
The economic environment remains “highly uncertain,” the bank said as it cut its growth forecast for 2016 to 1.4% down from 2%.
The bank also pushed back its estimate of when the Canadian economy will return to full capacity to around the end of 2017 from mid-2017.
BoC Governor Stephen Poloz was to comment on the decision at a press conference later in the day.